This paper analyzes how electoral incentives affected the performance of a major decentralized conditional cash transfer program intended on reducing school dropout rates among children of poor households in Brazil. We show that while this federal program successfully reduced school dropout by 8 percentage points, the program’s impact was 36 percent larger in municipalities governed by mayors who faced reelection possibilities
compared to those with lame-duck mayors. First term mayors with good program performance were much more likely to get re-elected. These mayors adopted program implementation practices that were not only more transparent but also associated with better program outcomes.

Conditional cash transfer (CCT) programs have proved to be effective in inducing chronic poor households to invest in the human capital of their children while helping reduce poverty. They have also protected child human capital from the shocks that affect these households. In this paper, we argue that many non-poor households exposed to uninsured shocks have to use children as risk coping instruments, with the risk of creating long term irreversibilities in child human capital development. We review recent experiences to explore how CCT programs could be designed to serve as safety nets for the vulnerable non-poor when hit by a shock. This would require a number of modifications to the way rules of operation of CCT programs are currently designed. As developing countries enter into a period of increasing economic turbulence, providing extended safety nets to the children of the transitory-poor is becoming a key feature of social protection.